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Monthly Archives: September 2019

Individuals With Significant Tax Debt Should Act Promptly to Avoid Revocation of Passports

The Internal Revenue Service in IR-2019-141 urged taxpayers to resolve their significant tax debts to avoid putting their passports in jeopardy. They should contact the IRS now to avoid delays in their travel plans later.

Under the Fixing America’s Surface Transportation (FAST) Act, the IRS notifies the State Department (State) of taxpayers certified as owing a seriously delinquent tax debt, which is currently $52,000 or more. The law then requires State to deny their passport application or renewal. If a taxpayer currently has a valid passport, State may revoke the passport or limit a taxpayer’s ability to travel outside the United States.

When the IRS certifies a taxpayer to State as owing a seriously delinquent tax debt, the taxpayer receives a Notice CP508C from the IRS. The notice explains what steps the taxpayer needs to take to resolve the debt. IRS telephone assistors can help taxpayers resolve the debt. For example, they can help taxpayers set up a payment plan or make them aware of other payment options. Taxpayers should not delay because some resolutions take longer than others.

Don’t Delay!
It’s especially important for taxpayers with imminent travel plans who have had their passport applications denied by State to call the IRS promptly. The IRS can help taxpayers resolve their tax issues and expedite reversal of their certification to State. When expedited, the IRS can generally shorten the 30 days processing time by 14 to 21 days. For expedited reversal of their certification, taxpayers will need to inform the IRS that they have travel scheduled within 45 days or that they live abroad.

For expedited treatment, taxpayers must provide the following documents to the IRS: 

  • Proof of travel. This can be a flight itinerary, hotel reservation, cruise ticket, international car insurance or other document showing location and approximate date of travel or time-sensitive need for a passport.
  • Copy of letter from State denying their passport application or revoking their passport. State has sole authority to issue, limit, deny or revoke a passport.

The IRS may ask State to exercise its authority to revoke a taxpayer’s passport. For example, the IRS may recommend revocation if the IRS had reversed a taxpayer’s certification because of their promise to pay, and they failed to pay. The IRS may also ask State to revoke a passport if the taxpayer could use offshore activities or interests to resolve their debt but chooses not to.

Before contacting State about revoking a taxpayer’s passport, the IRS will send Letter 6152, Notice of Intent to Request U.S. Department of State Revoke Your Passport, to the taxpayer to let them know  what the IRS intends to do and give them another opportunity to resolve their debts . Taxpayers must call the IRS within 30 days from the date of the letter. Generally, the IRS will not recommend revoking a taxpayer’s passport if the taxpayer is making a good-faith attempt to resolve their tax debts.

Ways to Resolve Tax Issues
There are several ways taxpayers can avoid having the IRS notify State of their seriously delinquent tax debt. They include the following:

  • Paying the tax debt in full,
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having a pending collection due process appeal with a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief. 

Relief programs for unpaid taxes
Frequently, taxpayers qualify for one of several relief programs including the following:

  • Payment agreement. Taxpayers can ask for a payment plan with the IRS by filing Form 9465. Taxpayers can download this form from and mail it along with a tax return, bill or notice. Taxpayers who are eligible can use the Online Payment Agreement system to set up a monthly payment agreement. Using the Online Payment Agreement system is cheaper and can save time.
  • Offer in compromise. Some taxpayers may qualify for an offer in compromise, an agreement between a taxpayer and the IRS that settles the tax liability for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. Taxpayers can use the Offer in Compromise Pre-Qualifier tool to help them determine whether they’re eligible for an offer in compromise.

Subject to change, the IRS also will not certify a taxpayer as owing a seriously delinquent tax debt or will reverse the certification for a taxpayer:

  • Who’s in bankruptcy,
  • Who’s identified by the IRS as a victim of tax-related identity theft,
  • Whose account the IRS has determined is currently not collectible due to hardship,
  • Who’s located within a federally declared disaster area,
  • Who has a request pending with the IRS for an installment agreement,
  • Who has a pending offer in compromise with the IRS, or
  • Who has an IRS accepted adjustment that will satisfy the debt in full.

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department of the delinquency and the taxpayer’s passport is not subject to denial during the time of service in a combat zone.

Once You’ve Resolved Your Tax Problem With The IRS,

The IRS Will Reverse The Certification Within 30 Days Of Resolution Of The Issue And Provide Notification To The State Department As Soon As Practicable.



If you’re leaving in a few days for international travel, need to resolve passport issues and have a pending application for a U.S. passport, you should call 888 8TaxAid immediately. If you already have a U.S. passport, you can use your passport until you’re notified by the State Department that it has been revoked. 
If your passport is cancelled or revoked, after you’re certified, you must resolve the tax debt by paying the debt in full, making alternative payment arrangements or showing that the certification is erroneous.
The IRS will reverse your certification within 30 days of the date the tax debt is resolved and provide notification to the State Department as soon as practicable.
Those who discover they have not been in compliance with their US tax obligations, including filing of income tax returns or FBAR reports, may avail themselves of the IRS Streamlined Offshore Procedure, which does not include the draconian FBAR penalty for Non-US Domiciliary's.

If You Face This Problem, You Should Consult with Experienced Tax Attorneys, As There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport. 


 Want To Keep Your US Passport?

Contact the Tax Lawyers at 
Marini & Associates, P.A.

for a FREE Tax Consultation Contact us at:
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FBAR Consent to Extend Statute Held Valid!

In United States v. Schwarzbaum (S.D. Fla. No. 18-cv-81147) a federal district court rejected an individual's claims that FBAR penalties assessed against him should be set aside because they were assessed after the limitations period expired.

Generally, U.S. persons who maintain a financial account in a foreign country (foreign financial account) must file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury’s Financial Crimes Enforcement (FinCEN) division. (31 CFR §1010.350(a)) Willful failure to file an FBAR may result in a penalty. (31 USC § 3521(a)(5)(A)). An FBAR penalty may be assessed at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty was assessed. (31 USC § 5321(b)(1)).

Between 2006 and 2009, the taxpayer, Isac Schwarzbaum, maintained several foreign financial accounts, including accounts in Costa Rica and Switzerland. Isac did not file FBARs for his accounts in Switzerland before 2011. 

In 2011, Isac joined the IRS’s Offshore Voluntary Disclosure Initiative (OVDI). As part of his participation in the OVDI, Isac signed an extension of the limitations period to assess and collect taxes and penalties related to his 2006-2009 returns. 

Isac then opted out of OVDI and underwent full examinations of his returns. After the examinations, the IRS decided to assert willful FBAR penalties against Isac. Those FBAR penalties (for tax years 2006-2009) were assessed in Sept. 2016.

Isac argued that the FBAR penalty assessments were time-barred. The IRS argued that Isac voluntarily signed a consent to extend the limitations period to assess and collect taxes related to his 2006-2009 returns. 
The district court held that Isac’s argument that the FBAR penalties assessed against him were time barred was meritless. The district court found that it was Isac's burden to show that his voluntary agreement to extend the limitations period to assess FBAR penalties was invalid since that was Isac’s affirmative defense. However, Isac failed to point to any legal authority to support his argument that the agreement he signed was invalid. (See Pages 8-9):
  • To the extent that Schwarzbaum argues that the penalties are time-barred, the argument lacks merit. Although Title 31 does not expressly authorize the extension of the applicable statute of limitations by agreement, it does not expressly prohibit such extensions. Schwarzbaum has failed to point to any legal authority indicating that such extensions would be improper. See Melford v. Kahane & Assocs., 371 F. Supp. 3d 1116, 1126 n.4 (S.D. Fla. 2019) (“Generally, a litigant who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a lack of supporting authority or in the face of contrary authority, forfeits the point. The court will not do his research for him.”) (internal quotations and citation omitted).  
  • Notably, Schwarzbaum does not dispute that he signed consents agreeing to extend the time during which FBAR penalties could be assessed and collected. See ECF Nos. [44-5], [44-6], [44-7].  
  • Rather, in his Reply he acknowledges the lack of authority, argues that the USA relies upon three irrelevant cases in its Response, and then endeavors to distinguish them.  
  • However, Schwarzbaum ignores that it is he who bears the burden of establishing the defense of statute of limitations in the first instance. See, e.g. Feldman v. Comm’r of Internal Revenue, 20 F.3d 1128, 1132 (11th Cir. 1994) (“When a taxpayer raises the affirmative defense of the statute of limitations, the taxpayer bears the burden to prove that defense.”) (citation omitted).  
  • Here, Schwarzbaum has failed to provide any authority to support his argument that an agreement to extend the time to assess FBAR penalties under Title 31 is invalid.

Have Undeclared Income from an Offshore Bank Account?  

Want to Know Which OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A. 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243

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Congress issues Report on TCJA Revisions to International Corporate Tax Rules

The Congressional Research Service has issued the Congressional Research Service-Issues in International Corporate Taxation: The 2017 Revision (P.L. 115-97)  report that looks at how changes made in 2017 by the Tax Cuts and Jobs Act (TCJA, PL 115-97) to the international corporate tax rules addressed concerns under prior tax law and what problems, issues, and legal uncertainties arose under the TCJA.
The report is divided into three sections. The first section explains prior international tax rules and the revisions made in the TCJA. The second section discusses the four major issues of concern under prior law: allocation of investment; profit shifting; repatriation; and inversions. The second section also discusses how the TCJA addresses these concerns and raises new ones. It also discusses issues associated with international agreements. The third section summarizes commentary about problems and issues, including legal challenges and uncertainty, within the new international tax regime and options that have been suggested.
The report states that one of the major motivations for the TCJA was concern about the international tax system. Issues associated with these rules involved the allocation of investment between the US and other countries; the loss of revenue due to the artificial shifting of profit out of the US by multinational firms (both US and foreign); the penalties for repatriating income earned by foreign subsidiaries that led to the accumulation of deferred earnings abroad; and inversions (US firms shifting their headquarters to other countries for tax reasons). In addition to lowering the corporate tax rate from 35% to 21% and providing some other benefits for domestic investment (such as temporary expensing of equipment), the TCJA also substantially changed the international tax regime.
The TCJA moved the tax system from a nominal worldwide tax on all foreign-source income, with a credit against US tax for foreign taxes due, to a nominal territorial system that does not tax foreign-source income. Nevertheless, the report says, both systems could be considered a hybrid of a worldwide and territorial system. Prior law reduced the tax on foreign-source income by allowing deferral (taxing income of foreign subsidiaries only if it was repatriated or paid as a dividend to the US parent) and cross-crediting of foreign taxes (so the credit for high taxes paid in one country could offset US tax on income from a low-tax country). The new system exempts dividends but also imposes a current worldwide tax on global intangible low-taxed income (GILTI), but at a lower rate. It also introduces a corresponding lower rate on intangible income derived from abroad from assets in the US (foreign-derived intangible income, or FDII). The TCJA adds the base erosion and anti-abuse tax (BEAT) to existing anti-abuse measures aimed at artificial profit shifting. BEAT imposes a minimum tax on ordinary income plus certain payments to related foreign companies.
Despite the lower corporate tax rate, the report says it is not clear that capital will be shifted into the US from abroad; although a lower rate reduces the tax rate on equity-financed investments, it decreases the subsidy to debt-financed investments. Whether equity investments increase or decrease depends on the magnitude of the TCJA (which appear largely offsetting) and the international mobility of debt versus equity. It is also not clear whether the investment in stock will be allocated more efficiently or in a way more optimal for US welfare, although economic theory suggests that reducing the tax subsidy for debt is a clear improvement.
Although the TCJA's territorial tax may make profit shifting more attractive, overall, given other elements of the new system, the report says it appears to make profit shifting less important. GILTI and FDII bring the tax treatment of income from intangibles in the US and abroad closer together, and BEAT and stricter thin capitalization rules (rules limiting interest deductions) also limit profit shifting, including shifting through leveraging.
The TCJA ends most "penalties" for repatriating earnings and thus eliminates the prior incentives to retain earnings abroad. As part of ending these penalties, the TCJA also introduced a series of measures aimed at making inversions (a method of retaining earnings abroad where a corporation restructures itself so that the current parent is replaced by a foreign parent; thus moving its tax residence to the foreign country) less attractive.
The report says some TCJA measures may violate international agreements such as the World Trade Organization (WTO), bilateral tax treaties, and Organization for Economic Cooperation and Development (OECD) minimum standards to prevent harmful tax practices.
Have an International Tax Problem?
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Marini& Associates, P.A. 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog